The stability of Africa's infrastructure-led growth

Africa's economic growth over the past two decades has been underpinned by significant investments in infrastructure, driven by the belief that robust infrastructure is the cornerstone of sustainable development.

From expansive transportation networks to energy projects, these investments have been positioned as critical levers for enhancing trade, attracting foreign investment, and improving overall economic stability. However, as the continent faces mounting debt and uneven economic outcomes, questions are emerging about the long-term viability of an infrastructure-led growth model. This article critically evaluates Africa's infrastructure-driven growth's stability, exploring its successes and the underlying challenges that may threaten its sustainability.

Historical Perspective

Over the past two decades, Africa has embarked on an ambitious infrastructure development journey marked by large-scale transportation, energy, and telecommunications investments. This period saw the launch of several mega-projects, such as the construction of the Mombasa-Nairobi Standard Gauge Railway in Kenya, Ethiopia's Grand Renaissance Dam, and Julius Nyerere Hydropower Station, set to become one of the largest dams in Africa. These projects were financed through domestic resources and international partnerships, particularly with China, significantly contributing to Africa’s infrastructure boom. 

However, the alignment between these infrastructure investments and Africa’s economic phase reveals a more complex picture. Whilst initially there was an increase in GDP growth across most African countries, recently this rate has not been maintained despite Africa’s determination to continue investing heavily in infrastructures. So far, the anticipated economic benefits from infrastructure-led growth have not fully materialized, raising concerns about the long-term sustainability and strategic alignment of these investments with Africa's broader economic goals.

Key Drivers of Infrastructure-Led Growth

The rapid expansion of infrastructure across Africa has been primarily driven by strong political will and strategic governance, with many governments prioritizing infrastructure as the cornerstone of their development agendas. Countries like Kenya, Nigeria, and Ethiopia have implemented ambitious infrastructure plans aimed at boosting economic growth and enhancing regional connectivity. Economic factors, such as the availability of international financing and favorable growth conditions in the early 2000s, have played a crucial role in Africa's infrastructure investment needs. Additionally, technological advancements, particularly in the energy and telecommunications sectors, have facilitated the integration of modern infrastructure, helping to lower costs and improve efficiency. These drivers collectively reflect Africa's commitment to infrastructure as a key lever for long-term economic development despite the mounting challenges related to debt sustainability and the alignment of investments with economic returns.

Challenges to the Stability of Infrastructure-Led Growth

Financing Gaps and Debt Sustainability

One of the most significant challenges to the stability of infrastructure-led growth in Africa is the growing financing gap and concerns over debt sustainability. Many African countries have relied heavily on external financing to fund their infrastructure projects, often through loans from international partners. However, this approach has led to a sharp increase in public debt levels. Based on the information from the media, countries like Kenya and Zambia have faced increasing difficulties in servicing their debt, with Zambia defaulting on its Eurobond payments. The reliance on debt to finance infrastructure projects raises concerns about the long-term economic stability of these countries, as the burden of debt servicing may outweigh the economic benefits of the infrastructure investments. Also, the currency fluctuations and continued weakening of currencies of African countries against the Euro, Dollar, and Pound Sterling significantly affect the ability of African countries to service such debts. 

Corruption and Mismanagement

Corruption and mismanagement pose significant threats to the success and stability of infrastructure-led growth in Africa. Misallocation of funds, inflated project costs, and lack of transparency are common issues that undermine the effectiveness of infrastructure projects. According to the African Development Bank, corruption costs Africa up to $148 billion annually¹,  impacting large-scale infrastructure projects. Such inefficiencies waste valuable resources, erode public trust, and deter potential investors, further destabilizing infrastructure-led growth.

Environmental and Social Risks

The environmental and social challenges associated with large-scale infrastructure projects in Africa cannot be overlooked. Many projects have led to significant displacement of communities and environmental degradation, which can trigger social unrest and long-term ecological damage. For example, the construction of dams, such as the Grand Ethiopian Renaissance Dam, has raised concerns over water rights and environmental sustainability in the Nile Basin. Similarly, the expansion of mining infrastructure in countries like the Democratic Republic of Congo has led to deforestation and loss of biodiversity. These risks not only jeopardize the sustainability of the projects themselves but also threaten the livelihoods of local populations, potentially leading to conflicts and further instability.

Geopolitical Risks

Geopolitical risks, including regional conflicts and external political influences, also challenge the stability of infrastructure-led growth in Africa. The continent's infrastructure projects often involve multiple countries and are susceptible to regional tensions and political instability. For instance, cross-border projects like the LAPSSET Corridor, which aims to connect Kenya, Ethiopia, and South Sudan, have been delayed due to security concerns and political disagreements. Additionally, the growing influence of foreign powers in financing and executing infrastructure projects has led to concerns about neo-colonialism and the strategic motives behind these investments. These geopolitical dynamics can lead to project delays, increased costs, and strained international relations, ultimately undermining the stability and effectiveness of infrastructure-led growth in Africa.

Opportunities for Strengthening Stability

Regional Cooperation and Integration

Strengthening regional cooperation and integration presents a significant opportunity to enhance the stability of infrastructure-led growth in Africa. Initiatives like the African Continental Free Trade Area (AfCFTA) and the African Union’s Program for Infrastructure Development in Africa (PIDA) aim to foster greater economic integration and coordinated infrastructure development across the continent. By pooling resources and aligning national infrastructure projects with regional priorities, African countries can reduce costs, mitigate risks, and ensure that infrastructure investments deliver broader economic benefits. For instance, the AfCFTA is expected to boost intra-African trade by USD$ 32 billion annually which averages 50% African intra-trade between now and 2023², underscoring the potential of regional cooperation to drive sustainable growth.

Innovative Financing Models

Adopting innovative financing models, such as public-private partnerships (PPPs), impact investing, and blended finance, offers a pathway to improve the sustainability of infrastructure projects in Africa. PPPs, in particular, allow governments to leverage private sector expertise and capital, reducing the reliance on debt while ensuring more efficient project delivery. In Nigeria, the Lekki Toll Road project is a successful example of a PPP that has improved transportation infrastructure while minimizing public debt exposure. Similarly, impact investing and blended finance models can attract investments to generate both financial returns and social or environmental benefits, ensuring that infrastructure development aligns with broader sustainable development goals.

Capacity Building and Governance Reforms

Enhancing capacity building and implementing governance reforms are critical to ensuring the long-term success and stability of infrastructure-led growth in Africa. Strengthening institutions, improving transparency, and fostering a culture of accountability can reduce corruption and improve the management of infrastructure projects. Training programs for government officials, supported by international partners like the World Bank and African Development Bank, can build the technical and managerial expertise needed to oversee complex infrastructure projects. Moreover, governance reforms that emphasize public participation and stakeholder engagement can ensure that infrastructure investments are responsive to the needs of local communities, thereby increasing their long-term viability and positive impact.

Conclusion 

While Africa’s infrastructure-led growth has undoubtedly laid the groundwork for economic development, the sustainability of this model is increasingly under scrutiny due to rising debt levels, corruption, environmental risks, and geopolitical challenges. African nations must consider a strategic pivot towards agriculture-led development to ensure long-term stability and inclusive growth. Agriculture remains the backbone of many African economies, employing over 60% of the continent's workforce and contributing significantly to GDP. By focusing on enhancing agricultural productivity, particularly among smallholder farmers, Africa can address food security, reduce poverty, and create a more resilient economic base. Investments in modern farming techniques, irrigation, and rural infrastructure, coupled with supportive policies and governance reforms, could unlock the potential of Africa’s vast agricultural resources. This approach offers a sustainable pathway to growth and aligns with the continent's unique factor endowments, ensuring that economic development is both inclusive and resilient in the face of global challenges.